XL Group has come up with a standalone terrorism insurance policy meant to cover gaps in the Terrorism Risk Insurance Act, or TRIA, whether or not the federal reinsurance law is renewed.

The new coverage comes out of XL Group’s U.S. Crisis Management business and will provide policy limits up to $100 million. XL Group said lenders consider the policy an alternative to the Terrorism Risk Insurance Program Reauthorization Act, or TRIPRA, which would extend the initial TRIA law after it expires on Dec. 31, 2014.

Ben Tucker, head of XL Group’s U.S. War, Terrorism and Political Violence underwriting team, said in a prepared statement that businesses want terrorism insurance coverage that can provide an alternative to TRIA, since reauthorization remains in question and the scope of coverage if it is renewed has yet to be determined.

XL Group’s timing for the new terrorism coverage is pretty much on-the-nose, considering that TRIA renewal is expected to come down to the last minute. The U.S. Senate approved a renewal bill in July by a wide margin—a measure that largely keeps intact the existing TRIA law passed after the 9/11 terrorist attacks and renewed a few times since. House Republicans haven’t passed their own version, but many are clamoring for changes such as increased deductibles. Others have advocated letting the law lapse. At the same time, many observers expect TRIA will be ultimately renewed.

Businesses and the property/casualty insurance industry have clamored for TRIA’s earlier renewal, arguing that the uncertainty is bad for business and insurance coverage stability.

XL Group said its policy would provide global coverage for assets harmed by war terrorism and attacks of political violence. It includes:

• An expanded definition of “terrorism” that enables coverage for political, religious and ideological purposes.
• Business interruption insurance coverage that the company claims can be limited or excluded by other terrorism markets. That includes cover for extra expense, loss of rental income, service interruption and also radiological contamination.
• Extended coverage for an act of sabotage.

XL Group’s insurance subsidiaries XL Specialty Insurance Co. and Indian Harbor Insurance Co. will provide the coverage itself.

Tucker said that XL Group’s insurance coverage would fill gaps left by TRIA, such as the requirement that an act of terrorism must be certified by the U.S. Treasury Secretary, Secretary of State or Attorney General. He said companies also take issue with the fact that losses under $5 million aren’t protected under the federal program.

“A $100,000 uninsured loss can be too much for many businesses to sustain without the right insurance protection,” Tucker said.

Source: XL Group